R squared and Reference rate: Difference between pages

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''Regression analysis and hedge effectiveness''.
A widely recognised and quoted interest rate - such as the Fed funds rate, the prime rate, or LIBOR - by reference to which a rate of interest is calculated.


''R squared'' is a measure of the goodness of fit between two variables.
For example, in the rate ‘LIBOR plus 50 basis points’, LIBOR is the reference rate.


In hedge effectiveness testing, it measures how closely the value of the hedging instrument tracks the value of the underlying exposure being hedged.


An ''R squared'' parameter equal to or greater than 0.80 is generally considered effective.
==See also==
 
*[[LIBOR]]
 
*[[Loan agreement]]
Other metrics for hedge effectiveness include Slope.
*[[Zero rate provision]]
 
 
R squared is also sometimes written ''R-squared'', with a hyphen.
 
 
== See also ==
* [[Basis risk]]
* [[Efficiency]]
* [[Hedge]]
* [[Hedge accounting]]
* [[Hedge effectiveness]]
* [[Regression analysis]]
* [[Slope]]

Revision as of 20:44, 18 June 2016

A widely recognised and quoted interest rate - such as the Fed funds rate, the prime rate, or LIBOR - by reference to which a rate of interest is calculated.

For example, in the rate ‘LIBOR plus 50 basis points’, LIBOR is the reference rate.


See also